Final answer:
The Atlantic National Bank needs to increase its reserves by $4,500 following a customer's withdrawal of $5,000 to meet the 10% reserve requirement on the reduced demand deposits of $95,000.
Step-by-step explanation:
Before the change in policy in March 2020, banks were required to hold a percentage of their demand deposits as reserves. This requirement was known as reserve requirements. Given the scenario where the Atlantic National Bank has demand deposits of $100,000, with a reserve requirement of 10%, they would typically need to hold $10,000 in reserves. However, following a withdrawal of $5,000 by a customer, the bank's demand deposits fall to $95,000. The required reserves would now be 10% of $95,000, which is $9,500. Since the bank previously needed $10,000 for $100,000, and the customer withdrew $5,000, the bank's reserves fall by $5,000 to $5,000. To meet the new reserve requirement of $9,500, the bank must increase its reserves by $4,500 ($9,500 - $5,000).